Surprise gain in Japan's machinery orders points to solid business investment


  • Business
  • Wednesday, 12 Jun 2019

Cabinet Office data released on Wednesday showed core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, increased 5.2% in April from the previous month.

TOKYO: Japan's machinery orders unexpectedly rose for a third straight month in April, in a sign business investment is holding up even as an intensifying Sino-U.S. trade war and global slowdown pile pressure on the country's export sector.

Cabinet Office data released on Wednesday showed core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, increased 5.2% in April from the previous month.

The reading compared with economists' median estimate of a 0.8% decline in a Reuters poll, and a 3.8% rise in March.

Capital spending has been a bright spot in the world's third largest economy, driven by investment in high-tech and labour-saving technology to cope with a labour crunch in the ageing society and refurbishing demand for upgrading old plants and equipment.

Although capital spending has so far been resilient to external headwinds, Japanese firms may turn cautious about boosting investment if uncertainty over the global economy and the bruising U.S.-China trade dispute persist, analysts say.

Washington and Beijing have been locked in a tit-for-tat tariff war for nearly a year, which has curbed global trade and upended supply chains ranging from Asia to Europe, undermining Japan's exports and factory output.

Solid domestic demand could dampen speculation that Prime Minister Shinzo Abe may once again postpone a twice-delayed sales tax hike to 10% from the current 8% in October.

The Cabinet Office raised its assessment of machinery orders, saying they are showing a pick-up.

Compared with a year earlier, core orders, which exclude ships and generators, rose 2.5% in April, versus a 5.3% drop seen by economists, the Cabinet Office data showed. - Reuters

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